Aston Martin shares collapse again

by Graeme Evans from interactive investor |

After a rapid start, Aston shares reverted to type and headed the wrong way, fast. Here's why. 

The rare sight of a revved-up Aston Martin Lagonda (LSE:AML) share price lasted just a matter of minutes today as the luxury car maker failed to shake off investor worries ahead of a pivotal 2020.

The company's third-quarter results initially attracted a wave of buying interest after a bigger-than-expected 16% decline in wholesale volumes was more than offset by consensus-beating figures on revenues and earnings for the three-month period.

There was relief that Aston Martin had also stuck by guidance after a series of downgrades since its ill-fated IPO, when the stock was aggressively priced at 1,900p in one of 2018's highest profile flotations. Shares are now 78% lower at 418p, despite today's 10% initial rally to 458p.

Source: TradingView Past performance is not a guide to future performance

A long-term recovery is likely to hinge on the success of Aston's first sport utility vehicle, the DBX, which is due to be launched in Beijing on November 20. The family-focused car will enter the UK's already crowded 4x4 marketplace at a price of £158,000.

Manufacturing will be at the new St Athan facility in South Wales, where the current headcount of 300 is planned to double ahead of the start of production in the second quarter of 2020.

However, the launch comes at the worst possible time for the global car industry, with Aston Martin admitting in today's results that trading in the UK and Europe remains challenging, particularly for its Vantage model. It still expects to sell between 6,300 and 6,500 cars this year, which follows a big downgrade to guidance in July.

The DBX has long been central to CEO Andy Palmer's drive to position the company for longer-term growth by increasing the manufacturing footprint and expanding product range beyond the three current core models - the DB11, Vantage and DBS Superleggera. His plan also includes the company's first full electric vehicle, the Rapide E, which is scheduled for launch in 2020.

The Gaydon-based company will also be looking for a little help from 007 over the next year as four Aston Martins are set to feature in the next James Bond film, which is due for release the first half of 2020. The four cars to feature in the film will be the classic DB5 and V8 Saloon, along with the new DBS Superleggera and Valhalla.

Source: TradingView Past performance is not a guide to future performance

Aston plans to mark the 25th instalment of the Bond franchise with deliveries of 25 iconic Goldfinger DB5 Continuations. A number of other special edition models have already boosted profitability in the current quarter, with deliveries for its most expensive new car - the DB4 GT Zagato Continuation - now under way.

The six Zagatos already delivered helped the company to beat forecasts in the third quarter, with underlying earnings of £47 million down by a smaller-than-expected 12%. The bottom-line loss for the period was still £13.1 million.

Net debt of £800 million jumped from £560 million at the end of 2018, which Aston Martin said partly reflected DBX investment in the St Athan plant and in future products.

It recently bolstered its balance sheet through a $150 million debt raise, although as this came with a 12% coupon the net interest guidance for 2019 is now £83 million compared with previous guidance of £70 million.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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